Child Poverty Fell to Record Low 5.2%

Published: https://www.census.gov/library/stories/2022/09/record-drop-in-child-poverty.html

By: Kalee Burns, Liana Fox and Danielle Wilson

Date: September 13, 2022

Child poverty, calculated by the Supplemental Poverty Measure (SPM), fell to its lowest recorded level in 2021, declining 46% from 9.7% in 2020 to 5.2% in 2021, according to U.S. Census Bureau data released today.

In contrast, when calculated by the official poverty measure, child poverty declined only 0.7 percentage points, from 16.0% to 15.3%.

The Census Bureau releases two measures of poverty every year: the official poverty measure and the SPM.

The new data show the significant impact the expansion of anti-poverty programs during the COVID-19 pandemic had on reducing child poverty.

To accurately compare the two, we created an expanded definition of the official poverty measure to include individuals typically excluded from that measure but included in the SPM. We refer to this as the official poverty measure with a consistent universe or official⁺ in this story.

The new data show the significant impact the expansion of anti-poverty programs during the COVID-19 pandemic had on reducing child poverty.

The official poverty measure is based on pretax cash income, while the SPM includes noncash benefits such as the Supplemental Nutrition Assistance Program (SNAP) and housing subsidies as well as net income after payroll taxes, tax credits and other necessary expenses. This infographic illustrates differences between the measures.

SPM child poverty rates have consistently been lower than the official ones since the beginning of the series in 2009. The two measures tended to move in the same directions up to 2019 (Figure below). 

In 2020, the two child poverty measures began to diverge due to the impact of large anti-poverty programs established or expanded in response to the COVID-19 pandemic, such as the stimulus payments, expansions to SNAP, and the Child Tax Credit (CTC).

In 2021, the child poverty rates for four race and Hispanic origin categories examined were at their lowest since 2009 (Figure below). 

SPM rates for Hispanic children fell the most, from 29.1% in 2009 to 8.4% in 2021. SPM rates for Black children fell by 17.1 percentage points, from 25.2% in 2009 to 8.1% in 2021.

Just between 2020 and 2021, Black child poverty rates slid by 8.8 percentage points. Similarly, Hispanic child poverty rates fell by 6.3 percentage points in that one year. 

Impact of Tax Credits on Poverty

An important contribution of the SPM is that it allows us to gauge the potential magnitude of the effect of tax credits and transfers in alleviating poverty.

Various additions to and subtractions from the SPM resource measure affected the number of people who would have been considered in poverty in 2021, assuming no behavioral or program eligibility changes. 

Some of these additions and subtractions (for the total population and three age groups) in 2021 are shown in the figure above. Additions include cash benefits like Social Security, also included in the official poverty measure, as well as noncash benefits and tax credits (like SNAP, school lunch programs and the Child Tax Credit) only in the SPM.

A key component of the 2021 American Rescue Plan Act (ARPA) was the CTC expansion. ARPA increased the value of the CTC from $2,000 to $3,600 for children under 6 years of age and to $3,000 for children between ages 6 and 17. The credit was made fully refundable and no longer limited by the taxpayer’s income tax liability.

In 2021, the CTC lifted 5.3 million people out of poverty, including 2.9 million children (Figure below).

Children lifted out of poverty due to the addition of the CTC include (Figure below; Table 1):

• 1 million children under 6.
• 1.9 million children between the ages of 6 and 17.

The inclusion of the CTC significantly decreased the number of children experiencing poverty across several race and Hispanic origin groups (Table 1).

The CTC reduced the Black child poverty rate by 6.3 percentage points, from 14.5% to 8.1% when included in SPM resources. Overall, this amounted to approximately 716,000 Black children lifted out of poverty by the inclusion of the CTC.

Similarly, the CTC reduced the Hispanic child poverty rate by 6.3 percentage points (not statistically different than the change in the Black child poverty rate), representing 1.2 million Hispanic children. The CTC also removed 820,000 White, non-Hispanic children and 110,000 Asian children from poverty. 

Many But Not All Children Lifted Out of Poverty

The CTC provided benefits to millions of children both above and below the SPM poverty threshold (not just those slightly below 100% of their poverty threshold). The widespread impact can be observed by examining income-to-poverty ratios.

For this analysis, the income-to-poverty ratio represents how much an individual or resource-sharing unit received after taxes and transfer income in relation to the poverty threshold.

An individual whose income is equal to their poverty threshold has an income-to-poverty ratio of 1.00 (100%). Ratios below 1.00 indicate income below poverty and a ratio greater than 1.0 indicates income above the poverty level.

For example, a ratio of 0.50 means that income was 50% of the poverty threshold.

The figure below shows the distribution of income-to-poverty ratio categories for children, estimated both excluding the CTC from SPM income (labeled “Without CTC”) and including the CTC amounts in the definition of income (“With CTC”).

The CTC significantly reduced the proportion of children in the two lower income-to-poverty ratio groups by:

• 1.1 percentage points to 1.4% in the lowest income-to-poverty ratio category (those with income less than 50% of the poverty threshold).
• 2.8 percentage points, from 6.6% to 3.8% for those with resources between 50% and 99% of the poverty threshold. 

While not captured in the SPM rate, the CTC also reduced the share of individuals slightly above poverty. The percentage of children in near poverty (100% to 149% of the poverty threshold) declined 6.0 percentage points from 18.1% without the CTC to 12.1% with the CTC.

The CTC also had an impact on people in higher income-to-poverty ratio categories.

For instance, including the CTC increased the share of individuals in the second-highest income-to-poverty ratio category (200% to 399% of the poverty threshold) by 5.8 percentage points to 44.1%.

ARPA greatly expanded both eligibility and the value of the CTC. While the previous analysis looked at the full impact of the CTC, which lifted 2.9 million children out of poverty, Table 2 shows how much of that was due to expansion of the CTC. It shows the expansion prevented 2.1 million of those children from falling into poverty. 

It also shows that 600,000 Black, 752,000 Hispanic and 649,000 non-Hispanic White children were lifted out of poverty due to the CTC expansion, although none of these changes are statistically different than one another.

More details on the impact of policies and programs on the SPM rate are available in today’s Poverty Report.

An upcoming working paper will further explore the effect of the expanded CTC on child poverty. Another working paper details the methodology behind the calculation of the CTC.

Definitions and Information on confidentiality protection, methodology, and sampling and nonsampling error are available on the technical documentation webpage.